U.S. system designed to prevent financial crisis ‘likely to fail,’ say experts
By Greg Robb
MarketWatch.com
Oct 3, 2015
BOSTON (MarketWatch) — The current U.S.regulatory structure designed to prevent another financial crisis is “Balkanized,” a “mess” and likely to fail when needed, experts said.
“The current U.S. institutional set-up is likely to fail in a crisis, and will be doing less to prevent a crisis than it should be,” said Adam Posen, president of the Peterson Institute for International Economics, at a two-day conference on financial stability sponsored by the Boston Federal Reserve.
Posen said that U.S. regulators, including the Fed, don’t have the tools or the mandates from Congress that they need.
Posen was especially critical of the umbrella group of regulators, the Financial Stability Oversight Council, that was set up by Dodd Frank to identify and deal with financial stability risks.
He said FSOC is chaired by the Secretary of Treasury, who is the most political member of the group.
“To me, the FSOC is a mess,” Posen said.
Mervyn King, the former head of the Bank of England, agreed that the U.S. institutional structure was a problem.
He said U.S. regulators had a knack of working well together in a crisis, whatever the institutional structure.
“It is before the crisis that the U.S. set-up is to be questioned,” King said.
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